Funding litigation

Question 1

what costs are involved in litigation?

Answer 1

• damages payable to other party (+any interest)
• costs of the other party (+any interest)
• solicitor’s costs
• disbursements (court fees)

Question 2

what are the available fee arrangements to pay solicitor’s costs?

Answer 2

1. private retainer
2. conditional fee arrangement (CFA)
3. damages based arrangement (DBA)

Question 3

what is a private retainer?

Answer 3

contract between solicitor and client including hourly rate and client will be billed monthly

Question 4

what is a conditional fee arrangement? what is recoverable from the other party?

Answer 4

• CFA = solicitor will not get paid unless the case is successful, and if the case is successful, the solicitor is paid the basic fee + success fee
• success fee = % of the basic fee (up to 100% but for PI case max 25%)
• recoverable from the other party if client wins = basic fee
• not recoverable from the other party if the client wins = success fee (must be paid from the damages awarded)
• does not cover disbursements and opponent costs (separate funding arrangements needed like ATE)

Question 5

what is a damages based agreement?

Answer 5

• DBA = solicitor will not recover fees if they lose, if they win then they will receive a % of the damages awarded
• max recovery:

1. PI cases = 25% of damages excluding damages for future care and loss
2. other cases = 50% of damages

• does not cover disbursements and opponent costs (separate funding arrangements needed like ATE)

Question 6

what other options are there to fund solicitor’s costs, disbursements, and/or opponent costs?

Answer 6

• BTE
• ATE
• third party funding
• Legal Aid (not usually eligible for civil claims)
• professional funding

Question 7

what is before the event insurance? what costs does it cover? what is recoverable from the other party?

Answer 7

• BTE = taken out before the need for legal work arises, sold with other insurance policies
• financial limit on cover provided
• can cover own costs and disbursements depending on policy terms
• premium NOT recoverable from other party if policyholder succeeds in litigation

Question 8

what is after the event insurance? what costs does it cover? what is recoverable from the other party?

Answer 8

• ATE = insurance taken out after the dispute has arisen
• covers = client’s own disbursements and opponent costs (not solicitor costs - so DBA/CFA used with ATE insurance usually)
• premium is not recoverable from the other party

Question 9

what is third party funding?

Answer 9

• Independent litigation funding is provided by a third party to enable parties to bring their cases to court (banks, private equity firms, hedge funds)
• In the event that the claim succeeds, the funder receives their money back, plus an uplift
• Generally limited to commercial cases of a high value

Question 10

what is professional funding?

Answer 10

Legal work might be funded by a trade union or professional organisation (e.g., union funding legal work involved in defending a professional negligence claim)